Malaysia’s Manufacturing Sector Sees Further Decline at Year’s End

Kuala Lumpur, January 2, 2025 – The Malaysian manufacturing sector experienced a significant downturn towards the end of 2024, as indicated by the latest S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI). The PMI fell to 48.6 in December from 49.2 in November, signaling the most pronounced slowdown since March.

Muted Demand

The sector was characterized by muted demand, with firms scaling back production at the steepest rate recorded for the year. This reduction in output was driven by a lack of new orders, leading manufacturers to utilize existing inventories. New business saw a slight moderation for the second consecutive month, reflecting weak customer confidence both domestically and internationally. Notably, international demand weakened for the first time since March, exacerbating the sector’s challenges.

Manufacturing Inventory and Purchasing

In response to the sluggish demand, manufacturers significantly reduced their purchasing activities and inventory levels, including both raw materials and finished goods. This was the strongest reduction in outstanding business in eight months, as companies focused on clearing existing orders rather than taking on new ones.

Inflation and Costs

A positive aspect within this downturn was the sharp slowdown in input price inflation, which hit its lowest point in a 55-month sequence of cost increases. This led to only a marginal increase in output charges, providing some relief to the sector amidst the broader economic slowdown.

GDP

While the PMI data suggests that GDP growth in the fourth quarter of 2024 continued, the pace has evidently slowed. However, year-on-year improvements in official manufacturing production were still observed, hinting at some resilience in the sector despite the current contraction.

Outlook

The outlook for the manufacturing sector in Malaysia remains cautious, with expectations of continued muted activity in the coming months. Manufacturers are preparing for a period of reduced demand by adjusting their operations accordingly, focusing on efficiency and cost management.

This scenario reflects broader economic trends where external demand, customer confidence, and global market conditions play significant roles in shaping local manufacturing performance.

Source: Data analysis based on the S&P Global Malaysia Manufacturing PMI for December 2024.

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